Check 21

What is Check 21?
The Check Clearing for the 21st Century Act, commonly known as Check 21, is a new federal law that became effective on October 28th, 2004. Check 21 is designed to foster innovation in the nation's payments system and to enhance its efficiency by making it less dependent on the physical transport of checks between banks. The law facilitates check truncation by creating a new negotiable instrument called a Substitute Check. This new document will permit banks to truncate original checks, to process check information electronically, and if needed to deliver Substitute Checks to banks that want to continue receiving paper checks. A Substitute Check will be the legal equivalent of the original check and will include all the information contained on the original check. The law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the act to create Substitute Checks.

Frequently Asked Check 21 Questions & Answers

Q: Why was Check 21 created?
A: Check 21 was created to reduce the time, risks and costs associated with paper check processing and transportation. Traditionally, banks rely on physical transportation, such as planes and trucks, to deliver checks between banks for payment. Check 21 allows original paper checks to be removed from the collection process and to be replaced with substitute checks created from digital image files. Banks can send check images electronically, reducing dependence on transportation that can be impacted by delays, such as weather or natural disasters.

Q: How will the Check 21 law affect my personal account or business account?
A: Generally it will have no impact on the way you issue or use checks. However, if a check deposited to your account is returned unpaid, you may receive a Substitute Check in lieu o the original.

Q: What will I receive with my statement?
A: Generally you currently do not receive your processed checks, therefore, your monthly account statement will not be affected — all checks will continue to be listed on your statements in the same manner.

Q: What does Check 21 do?
A: Check 21 streamlines and improves check processing without requiring customers to change the way they write checks. It simply requires banks and customers to accept paper reproductions of original checks. These reproductions are called substitute checks.

Q: What happens to the original checks?
A: In many cases, banks will continue to process and clear checks just as they have in the past. However, banks that convert checks to Substitute Checks will most likely destroy the original paper checks shortly after the Substitute Check has been created.

Q: Will checks clear faster once Check 21 becomes effective?
A: As banks invest to capitalize on the opportunities presented by Check 21 checks that you write may clear faster. Checks you deposit may also clear faster. Checks you deposit may also clear faster, and notification of checks you deposited that are returned unpaid may occur more quickly too.

Q: Must everyone accept a Substitute Check as proof of Payment?
A: Yes. This new law requires everyone (banks, customers, businesses, government agencies, etc.) to accept a properly prepared Substitute Check as if it were the original check. All checks except foreign checks are eligible to become a Substitute Check.

Q: Is there an option to "opt out" of Check 21?
A: No. It will apply to all financial institutions and their customers. There will be no "opt out" exceptions.

Q: What will a Substitute Check look like?
A: In many ways, the Substitute Check looks like the original paper check. The size of the Substitute Check will be similar to the size of a business check; it will contain the same information as the original check and it will show the front and back of the check, including endorsements. It will contain the following wording on the left side of the document: "This is a legal copy of your check. You can use it the same way you would use the original check." The appearance of each Substitute Check may vary slightly depending on the type of equipment used in processing.

Sample of a Substitute Check Front	Sample of a Substitute Check Back

Q: Does Check 21 apply to all checks?
A: Yes. The ability to create a substitute check applies to all U.S. drawn checks: personal, business, commercial, cashier's, traveler's, U.S. Treasury, state and local government, money orders, share drafts (i.e. mutual fund drafts), warrants, etc.

Q: What is the difference between the Check Image Statements I'm currently receiving in my monthly statement and a Substitute Check?
A: Your current image statement contains direct copies of checks. You may notice that, in addition to direct copies, your image statement may contain copies of substitute checks wit the special processing requirements as shown in the sample. Either image, original or substitute checks, will remain valid as proof of payment.